Indians

Booth School of Business, University of Chicago
University of Chicago Law School

University of Chicago Press
Raid or Trade? An Economic Model of Indian-White Relations

Author(s): Terry L. Anderson and Fred S. Mc Chesney
Source: The Journal of Law & Economics, Vol. 37, No. 1 (Apr., 1994), pp. 39-74
Published by: University of Chicago Press for Booth School of Business, University of Chicago
and University of Chicago Law School
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RAID OR TRADE? AN ECONOMIC MODEL
OF INDIAN-WHITE RELATIONS*
TERRY L. ANDERSON and FRED S. MC CHESNEY
Montana State Emory University
University
[W]henitwas no longersafeto seize valuablesbymainforce,

tradeofferedan alternativeway of gettingpossession....
Oscillationbetweenraidingand tradinghas certainly
occurred
repeatedlyin history.'
I. INTRODUCTION
WHITES came to America brandishingroyal chartersthat allocated

rightsto resources among each national group (although not among
groupsrepresentingdifferent Becausethesecharters
sovereigns). didnot
take
necessarily accountof existingaboriginal claims
rights,conflicting
to land had to be resolved.
As generallytold,thestoryof Indian-whiterelationsafterwhites'ar-
rivalhas two different In thefirst,wheneverIndianswould
renditions.
notacquiesceto whites'intrusions,
violentresolutionofconflicts-even
extermination-resulted.By this firstaccount, "from beginningto end
primarytitlewas deemed to come by rightof conquest, Indiantitlebeing
in theviewsof the crown[and]thesettlers.'"2
inferior This monolithic
* Andersonis ProfessorofEconomics and SeniorAssociate, Political

EconomyResearch
Center; McChesney is Professorof Economics and RobertT. ThompsonProfessorof Law
and Business. We acknowledge helpfulcommentsfromLouis De Alessi, Robert Cooter,
David Galenson, Jack Hirshleifer,Ronald Johnson,Dean Lueck, Roger Meiners, Mark
Ramseyer, Randy Rucker, Todd Sandler, Kim Thomas, and especially fromDavid Had-
dock. Comments on the empirical model fromLee Craig, ChristopherCurran, Hashem
Dezhbakhsh, and BarryHirsch were very useful. JohnCurranprovidedvaluable research
assistance. In addition,veryusefulcommentswere received fromparticipantsin presenta-
tionsat the Universityof Chicago, ClaremontGraduate School, Clemson University,Flor-
ida State University,GeorgetownUniversity,NorthCarolina State University,the Public
Choice Society, the SouthernEconomic Association, the Universityof Iowa, and the Uni-
versityof SouthernCalifornia.
1 WilliamH. McNeill, The Rise of the West 454 (1963).
2
JonathanR. T. Hughes, Social Controlin the Colonial Economy 35 (1976).
[Journalof Law and Economics, vol. XXXVII (April 1994)]
? 1994 by The Universityof Chicago. All rightsreserved.0022-2186/94/3701-0003$01.50
39
40 THE JOURNALOF LAW AND ECONOMICS
model of whiteacquisitionof Indian resourcesby conquest has spawned

manya westernmovie and historicalbest-seller.3One historiancharacter-
izes the conventionaltale as one long episode of " 'massacre,' 'extermi-
nation,' and 'annihilation,' both 'utter' and 'complete,'" recounted
"with overtonesof racism,genocide, and othershibboleths."4
The competingstoryis one in which Indian-whiterelationsevolved
fromgood (peaceful) to bad (violent)as Americanhistoryunfolded.Well-
knownhistoricalexamples display the ends of the chronologicalcontin-
uum. The firstPilgrimThanksgivingowed much, if not all, to peaceful,
mutuallybeneficialrelationswiththe Indians. But Custer's Last Stand,
ChiefJoseph's attemptedescape to Canada, and, finally,Wounded Knee
showed how relationsdeterioratedfromcooperationto conflictas whites
increasinglymoved into Indian territory.
This second, more complex, storymustaccount forchange over time
in Indian-whiteaffairs;changes in whites' ideologies or attitudestoward
Indian propertyrightstypicallyare invoked. Seventeenth-century Euro-
peans supposedly believed that theirland claims were "unjustifiedand
illegal if the priorrightof the Indian were not recognized.Full titlewas
in the Indian ... fromwhom alone a valid titlecould be derived."' But
by the end of the 1800s the prevailingattitudehad allegedlybecome that
ofTeddy Roosevelt: "[T]he settlerand pioneerhave at bottomhadjustice
on theirside; this great continentcould not have been kept as nothing
but a game preserveforsqualid savages.'6
The two contrastingaccounts of Indian-whiterelationsare usuallytold
in noneconomicterms,but theyhave a straightforward economic inter-
pretation.7 Both models begin with increasing relative scarcity of re-
sources in Europe, which stimulatedimmigrantsto cross the Atlantic.
The arrivalof whitesdemandingresources,especiallyland, naturallycre-
ated or increased scarcityvalues in the New World. But before immi-
grantscould fullycaptureadditionalwealth,theyhad to resolve Indians'
claims.
In the resolution,both sides had a choice. They could exchangepeace-
3 For example, see Dee Brown, Bury My Heart at Wounded Knee (1970).
4 Don Russell, How Many Indians Were Killed? Am. W., July1973, at 42.
5 WilcombE. Washburn,Red Man's Land/WhiteMan's Law 41 (1971).
6 1 Theodore Roosevelt, The Winningof the West 90 (1889).
7 The conflicting portrayedin thenews "charac-
storiesare similarto models ofterrorists,
teristically[as] madmenwho cannot be bargainedwith," seekingonly to exterminatetheir
foes. Scott E. Atkinson, Todd Sandler, & John Tschirhart,Terrorismin a Bargaining
Framework,30 J. Law & Econ. 1, 3 (1987). The alternativemodel presentedby Atkinson
et al. sees terroristsas rationallyseekingvariousgoals whichcan be attainedby bargaining
ratherthan killing,a model foundwell supportedempirically.
RAID OR TRADE? 41
fully,therebyenhancingtotalwelfare,or theycould fight,imposingdead-

weightwelfarelosses overall. It is here thatthe two storiesdiverge.
This articlepresentstheoryand evidence in favorof the second story,
thatrelationsevolved over timefroman era of relativepeace, including
contractsforpropertyrights(treaties),to an era of violenttakings.The
evolutionis explained in Section II by an economic model of relations
between potentiallywarringgroups. It draws fromtwo seeminglyunre-
lated strainsin the literature,the evolutionof propertyrightsand poten-
tial litigants'decisions to settleor go to trial.The model is thenused to
derive a series of implicationstestable by examinationof Indian-white
relationsin America. Section III presents qualitativeevidence and sta-
tisticaltests of the model. The perspectivethroughoutis positive, not
normative:the article does not seek to justifyresortto war, just to ex-
plain it.
II. AN ECONOMIC MODEL OF NEGOTIATION VERSUS TAKING
A. The UmbeckModel
JohnUmbeck's article on the choice between contractand violence
providesa usefulstartingpoint. No distribution of rightsis stable ifany-
one has less thanhe can obtainby forcefullytakingfromothers."[R]ights
to propertycan exist only as long as otherpeople agree to respectthem
or as long as the owner can forcefullyexclude those who do not agree."
So "any contractual arrangemententered into by wealth maximizers
mustassign to each individualthe rightsto at least as much propertyas
they could get with personal force."8 Focusing on the Californiagold
camps, Umbeck hypothesized that lands would be redistributedfrom
existingminersto newcomers because the marginalvalue of a unit of
gold land would be higherto the latter. He concluded that "the total
amount of homogeneous miningland [would] always be divided evenly
amongthe competingminers," as long as minershad identicalgold pro-
ductionfunctions,claimantswere equal in theirabilitiesto use violence,
claimantshad only theirhumancapital to draw on, and negotiationcosts
were zero.9
Althoughthese conditionsmay model gold miningin Californiaaccu-
rately,theydifferin crucial aspects fromthe Indian-whiteconfrontation
in America. Indian and whiteclaimantsto resourceswere not at all times
8 JohnUmbeck, MightMakes Rights:A Theoryof the Formationand InitialDistribution

of PropertyRights,19 Econ. Inquiry38, 39, 45 (1981). See also RobertRider, War, Pillage
and Markets,75 Pub. Choice 149 (1993).
9 Umbeck, supra note 8, at 43.
and places equal in theirabilitieseitherto produceor to use violence.

Whitesin particular had considerablephysicalcapital(especiallyguns
and fortifications)
to drawon in fighting Indians.And the transaction
costsofnegotiating peacefuloutcomescouldbe considerable.
One aspectof Umbeck'smodelis particularly noteworthy, thediffer-
encebetweenmerecapacityforforceand actualresortto violence.Um-
beck notedthat,whilepractically all minerswere armedand capable
of usingforce,actualviolencewas rare,a phenomenon notedby other
economists and historians oftheWest."1Even ifone sidehad a prepon-
deranceofmight, thatwouldonlyalterthetermsoftradeina negotiated
outcome.This pointwas poorlyunderstood untildevelopedin a rather
different
setting.11
B. Models
Settlement-Litigation
Numerousarticlesabout disputants'decisionsto settleor litigatea
case providea usefulframework foranalyzingthedecisionto negotiate
a treatyor go to war. RobertCooterand Daniel Rubinfeld summarize
thisframework byconsidering fourstagesofa legaldispute:harm,asser-
tionof a legal claim,bargaining (and maybesettlement), and litigation
(whenno settlement is reached).12 Each phase has its analoguein the
historyof Indian-white relations.(It is assumedinitially
thatcollective
decisionsregarding Indian-white disputesare madewithineach groupto
maximizetotalgroupwelfare;publicchoice mattersinvolving special-
decisionsare introduced
interest later.)
1. Harm
"Whenthe whiteand red races meton the Americanfrontier there
occurredinnumerable violationsof thepersonaland property rightsof
one groupbymembers oftheother.""13
Europeans'claims to landgener-
allycouldbe tracedbackto theirrespectivesovereigns,
whosometimes
grantedto individualsand corporations
authorityto negotiatewiththe
10
Terry L. Anderson & Peter J. Hill, The Not So Wild, Wild West, 3 J. Libertarian
Stud. 9 (1979); Roger D. McGrath,Gunfighters, Highwaymenand Vigilantes:Violence on
the Frontier(1984); Russell, supra note 4.
" But see Donald Wittman,How a War Ends: A RationalModel Approach,23 J. Conflict
Resolution743, 751 (1979): "War and peace are substitutemethodsof achievingan end. If
one side is more likelyto win at war, its peaceful demands increase; but at the same time
the otherside's peaceful demands decrease."
12 Robert D. Cooter & Daniel L.
Rubinfeld,Economic Analysis of Legal Disputes and
Their Resolution,27 J. Econ. Lit. 1067 (1989).
13 FrancisPaul Prucha,AmericanIndian Policy in the FormativeYears: The IndianTrade
and IntercourseActs, 1790-1834, at 188 (1962).
RAID OR TRADE? 43
Indians;royalgranteeswere rarelyinclinedto negotiatewithIndians

beforeundertaking permanent however.To Indians,Europe-
settlement,
ans weremerelytrespassers, whohad no rightto thelandthey
intruders
claimed.The trespassobviouslywas costlytoIndiansiftheresourcewas
scarce.
But evenifnotscarceamongIndiansthemselves, landhad value ifit
could be sold or tradedto whitesforEuropeangoods.14In fact,the
marginalvalue of land to arriving
whitesgreatlyexceededits value to
Indianholders.StanleyLebergottestimatesthata Europeanimmigrant
requiredabouttwoacresto provideforhimself intheNew World,while
Indiansrequiredup to a thousandtimesmore."Given theirless land-
intensivediet,the newerimmigrants could buy up land at rateswell
abovetheirvalueintheIndianwayoflife."''15To initiate
beneficial
trade,
however,IndianswouldhavetoassertcredibleclaimstowhatEuropeans
wanted.
2. Assertionof Claims
Once whitestrespassedon Indianterritory, twofactorswoulddeter-
minewhetherIndiansassertedclaimsto thedisputedresources.First,
assertinga claimdependson theexpectedloss froma continuing trespass
relativeto thecostofasserting theclaim.The expectedloss dependson
thevalueofthedisputedresource,andthecostofassertionis a function
of thecosts of endingthe disputeby negotiation or by fighting,
as de-
scribedbelow.
Second,assertinga claimrequiresa credibleabilityto fight.Even if
negotiation is one's aim,therecan be no contractwheretheotherside
has thephysicalabilitysimplyto takeat no important cost. Onlyin the
cases whereIndianrights werevaluableenoughto defend(thatis, where
Indianshad sufficient powerto makea crediblethreat)would
military
bargaining and exchangeresultfollowing whites'trespass.
Figure1 highlights the implications
of thisapproach.Imaginesome
finiteamountofland,Lmax. The landis valuableto bothwhitesandIndi-
ans, withMBw showingdiminishing returnsto whitesas theirshareof
Lmax increasesandMBI showing thesamediminishing returnsforIndians,
measuredfromLmax back to the origin,indicating thatthefirstunitof
landgivenup to whitesis oflow marginal value.Ifneither
sidecan resort
14 Indians
mighteven give the land to whitesto establishtheircolonies, ifthe subsequent
gains fromtrade in goods and services other than land were expected to be sufficiently
great.
15
Stanley Lebergott,The Americans: An Economic Record 15-16 (1984).
44 THE JOURNAL OF LAW AND ECONOMICS
$
MB
MB
Land
0 L L L Lmax
FIGURE 1
to forceand negotiationcosts(including costsof strategicbehavior)are

zero,thepartieswillexchangefrom0 to L0.
Morerealistically,however,letbothwhitesand Indianspossesssome
credibleabilityto use force.The level of forceeach side chooses (for
example,numberof troops)willdepend,ceterisparibus,on thethreat
posed by theother.Assumethateach side formulates expectationsre-
gardingthe threatfromthe otherbased on suchthingsas thevalue of
thelandandthemilitary technology availableto each. Giveneach side's
expectations,themarginal costsofIndians'defending andwhites'taking
land are shownby MCI and MCw. The respectivecost schedulescan
takeanyconventional form;it is unimportant whetherone side's costs
are systematically
greateror less than the other's.
Figure1 represents just one aspectof a complicated game-theoretic
problem.'" diagramignoresthequestionof optimallevelsof taking
The
16See, forexample, Jack Hirshleifer,The Economic Approach to Conflict,in Economic

Imperialism:The Economic Approach Applied outside the Field of Economics (Gerard
Radnitzky& Peter Bernholzeds. 1987); JackHirshleifer,The Technologyof Conflictas an
Economic Activity,81 Am. Econ. Rev. 130 (1991).
RAID OR TRADE? 45
or ofdefenseexpenditures. Obviously,theoptimallevelof spending on

taking(defense) is a functionof thespending on defense(taking)by the
otherside,whichdependsinteralia on assumptions aboutthenatureof
thegame(andthuswhether an equilibriumis achievableand,ifso, how).
But game-theoretic modelshave notbeen requiredto generatetestable
predictionsaboutthenatureofconflict.17
The pointofinterest fromFigure1 is thatthereare zonesdemarcating
differentdecisionsaboutassertingclaims.Whateverthegame-theoretic
implicationsforbehavior,whatmatters hereis thatmaintaininga credible
threatto use forcehas positivecoststhatare belowand above themar-
ginalvalue of land overrelevantranges.As longas themarginal costs
riseand eventually exceed themarginal valueofland,therewillalways
be areaswhereitis notworthdefending or takinglandfortherespective
sides.
Introductionofcredibleforcedoes notnecessarily meanarmedconflict
willensue. Withthe benefitand cost schedulesas shownin Figure1,
Indianswillnotexpendmilitary resourcesto defendtheirlandfromzero
toL1, sincethecostofdoingso wouldexceedthebenefits. Even though
Indiansareharmed,theywouldassertno credibleclaimtotheland;there
willbe neitherfightingnornegotiation fromzeroto L1. Similarly, beyond
L2 therewill be no because
conflict whites willnotfinditworthwhile to
asserta claimto theland.
BetweenL1 and L2, controversy willoccur.It willbe worthIndians'
whileto asserttheclaimandworthwhites'whileto takeor negotiate for
Indianland.The exactlocationsofL1 andL2 cannotbe specified ex ante.
Betweenthetwolies a "zone ofcontroversy" in whichcontract or war-
farewillensue."'In thatarea, crediblethreatsofgreaterforcewillalter
thetermsof tradein negotiation, butactualviolenceis nota necessary
outcomewhenclaimsare asserted.19
17 See, forexample, Wittman,supra note 11. See also note 18 infra,discussingsimilar

predictionsmade by both game-theoreticmodels and the model here.
18 Hirshleifer,Economic Approach, supra note 16, at 355-56, makes the same point
about a "sphere of conflict"in termsof scale economies fromwarfare."But in attempting
to extend militarysway over larger regions, diminishingreturnsare encounteredto the
projectionof power away fromthe base-hence we do not see a single universalworld-
state." See also Hirshleifer'sdiscussion of "areas of refuge,"at 356, whichare akin to the
zone beyond L2 in Figure 1.
19 Thus far, no ignorance or uncertaintyhas been assumed, thoughthat assumptionis
relaxed shortly.Because eitherpartymay not know how valuable the resource is to the
otherpartyor what level of resources the other side is preparedto devote to assertinga
claim (that is, how credible the assertion of a claim is), decisions in this stage are made
"under uncertaintyto be solved recursively."Cooter & Rubinfeld,supra note 12, at 1071.
Thus, some claims will not be asserted when the benefitsof the resourceto the otherparty
are misperceivedto be small; otherswill not be asserted when the level of the opponents'
forceis so greatas to make a threatto resistencroachmentincredible.
The zone ofcontroversy's size dependson each side's marginal

bene-
fitsoflandownership relativeto themarginal costsoftakingordefending
land. Changesin costs and benefitscan occur forexogenousreasons
(forexample,changesinpopulation density,agricultural or
productivity,
costs), causing
transportation the size of the zone to change.Ceteris
paribus,as whites'abilityto use forceincreases,thenetvalueoflandto
Indiansdecreasesbecause the prospectof losingtheland by forcein-
creasesand,alternatively, theprospective termsoftradedecline.
3. Raid or Trade
Once in the zone of controversy, partiesmustchoose betweenbar-
to a solution.At thatstage,"the interests
gainingor fighting ofthetwo
partiesdivergewithrespectto divisionofthesurplus,butconvergewith
resolution
respectto an efficient of thedispute";disputesare resolved
"whenlegalentitlements
efficiently areallocatedtothepartieswhovalue
themthemost,legalliabilities are allocatedto thepartieswhocan bear
themat least cost, and the transaction costs of disputeresolutionare
minimized."20 Undercertainassumptions, resolutionofdisputeswillal-
waysbe achievedthroughnegotiation because warfare(like litigation)
imposesmutualdeadweight losses. Whenit is assumedthatbothsides
haveaccurateinformation abouttheexpectedgainsandlossesfromwar
and therelevantprobability distributions, partieswillchoose rationally
notto fightovera givenresource.21 Therefore, no violencewouldever
occur,thoughchangesin relativeabilityto use forcewouldalterthe
termsoftradein anynegotiation.
However,perfect information is nota necessarycondition fornegotia-
tionto prevailoverviolence.22Beginbyassuming thatwhiteshavemade
a decisionto trespass(harm)and thatIndianscan asserta claim.After
assertionofa claim,negotiated settlement ofthedisputerequiresa sur-
plusabove thespoilsofbattleforIndianand whitedisputants. A neces-
sarycondition fornegotiation is some surplusforbothIndians(SI) and
whites(Sw) fromchoosingnegotiation (N) ratherthanfighting (F).
20 Cooter &
Rubinfeld,id. at 1070.
21The assumption "that each miner can costlessly determinehow much labor other
minersare willingand able to allocate to a particularconflict"then "allows the resolution
of a conflictwithoutthe actual use of scarce resources (labor time)in violence because no
one would fightif the outcome were already knownin advance." Umbeck, supra note 8,
at 41. For a model similarto Umbeck's, in thatit findswar was based on both sides' lack
of accurate information, see Gerald Gunderson,The Originof the AmericanCivil War, 34
J. Econ. Hist. 915 (1974).
22 The model here is standardforanalyzingthe settlement-litigation decision. See George
L. Priest& Benjamin Klein, The Selection of Disputes forLitigation,13 J. Legal Stud. 1
(1984).
RAID OR TRADE? 47
For Indiansto havea surplusfromnegotiation

(SI), theircostsoffight-
ing(CFI) minusthe value of land gained(retaken)in fightingto retake
lostland (GFI) mustexceed thecostsof negotiatinga peacefulsolution
(CN1):
S, = CF, - GF, - CNI > O. (la)
As thecostsoffighting increase,ceterisparibus,thesurplusfromnegotia-
tionrises;as thegainsfromfighting or thecostsof negotiating rise,the
negotiation surplusfalls.
Likewise,forwhitesto have surplusfromnegotiation (Sw), thecosts
of fighting(CFw) plus the losses fromfighting (LFw) mustexceed the
costsofnegotiating a peacefulsolution(CNw):
Sw = CFw + LFw - CNw > O. (lb)
As boththecostsoffightingplusthevalueof(previously taken)landlost
infighting
increase,theirsurplusfromnegotiationincreases;as thecosts
ofnegotiating
rise,thenegotiationsurplusfalls.23
The twosufficiencyconditionsfornegotiationimply
S S + Sw > 0.24 (c)
Hence, the sufficient
conditionforfighting
is theabsenceof a positive
surplus(S) fromnegotiation:
S = S, + <0
Sw (2)
= [(CF, + CFw) - -
(CNI + CNw)] + [LFw GF,] < 0.
If CF = (CF, + CFw) and CN = (CN, + CNw), thenthemaincompo-
nentsof the surplus,shownin the two pairsof brackets,are (1) the
differencebetweenthecostsoffighting(CF) andthecostsofnegotiation
(CN) and (2) thedifferencebetweenwhatwhiteswilllose fromfighting
(LFw) and whatIndianswillgain(GFI). To theextentthatnegotiation
costsare highrelativeto thecostsoffighting,
ceterisparibus,it is more
likelythatS < 0.
Assumeforthe momentalso thatthevalue of territory in disputeis
the same to both Indians and whites,so thatLFw = GF, = T. The term
in the second pair of bracketsin equation(2) disappears,leavingthe
sufficient
conditionforfighting
as
S = CF - CN < 0. (3)
23 If whitesanticipateactuallygainingmoreterritory in any war, the "losses" term(LFw)
is negative,reducingthe size of Sw.
24 If either or
S, Sw is less thanor equal to zero, the partywiththe positivesurplusmust
be able to share its surpluswiththe other,creatingthe possibilityof negotiation.
The surplusfromnegotiation is simplythedifference betweenthecosts

and the costs of negotiating.
of fighting are
If the costs of negotiating
zeroandthecostsoffighting positive,as inUmbeck'smodel,negotiation
alwayshas a positivesurplus,and so thesufficient condition
forfighting
willneverbe met.
However,introduction of uncertainty intothemodelmeansthesuffi-
cientconditionforfightingmaybe met.For simplicity, assumethereis
uncertaintyonlyaboutprospectsofwinning or losing(andnotaboutthe
valueofthespoils):
S = CF - CN - (P T) + (Pw T) < 0, (4)
whereP, and Pw referto theprobabilitiesIndiansand whitesassignto
gainingand losingT. Equation(4) holdsonlywhen
(CF - CN) < (P, - Pw)T, (5)
or,
(PI - Pw) > (CF - CN)/T. (6)
Fighting willoccurwhenthesufficient
therefore in inequality
conditions
(6) are met.
C. Conditionsfor Fighting
The likelihood (6) willhold(thatis, thatfighting
thatinequality ensues)
dependson each party'scostsofinformation and negotiation,pluscosts
action.Considereach.
ofcollectivemilitary
1. Information Asymmetry
Assuming CF > CN, theleft-handterminequation(6) mustbe positive
condition
ifthesufficient is to hold.Ceterisparibus,theprob-
forfighting
abilityassignedbyIndiansto winning T backmustexceedtheprobability
whitesassignto losingit. Intuitively,fightingis morelikelyto follow
whites'trespasswhenIndiansare moreoptimistic thanwhitesaboutthe
outcomeoffighting. for
Suppose, example, that whiteshave developed
betterweapons(like repeating rifles).BeforeIndianshave experienced
the effectsof whites'greaterfirepower, theymightoverestimate their
in fighting,
likelihoodof prevailing makingfighting morelikely.Faulty
information about numbersof Indianbravesor whitetroopslikewise
wouldalterdecisionsto negotiateor fight.
Equation(6) shows,however,thatimperfect aboutout-
information
comesis neither necessarynorsufficientfordisputants overresourcesto
fight.Imperfectinformationcausingdisputants to assignidentical(albeit
RAID OR TRADE? 49
wrong)probabilities cannotproduceconflict as longas CF > CN. Over-

all, the sufficient
conditions forfighting-systematicdifferencesin esti-
matedprobabilities ofwinning by thetwosides(PI,= Pw) and relatively
optimistic estimatesof thechancesof successby thepartyharmed(P,
> Pw)-are ratherrestrictive. Thus,in theempirical literature
on rates
of settlement versuslitigation,"A typicalfinding is thatten disputes
settleoutofcourtforeveryone thatis tried.""25Atleastamongjudiciable
disputes,negotiation is the is
rule;fighting theexception.
2. Transaction
Costs
Even withdifferentialinformation and therefore
differentprobabilities
assignedto winning and losinga war,thelikelihoodoffighting is a posi-
tivefunctionofnegotiation costs.These includethecostofdefining and
enforcingproperty As property
rights. becomeless clearandother
rights
transactioncostsrise,CN growsrelativeto CF inequation(6), andresort
to violencebecomesmoreattractive. In Indian-white
negotiations, sev-
eraltransactioncostsare potentiallyimportant.
Language and Customs. One obviousobstacleto negotiation over
resourceswouldbe differences inlanguageandcustomsbetweenIndians
and whites.The importance of languageand customdifferences can be
overstated,especiallywithrespectto some easterntribes.But many
triballeaderslacked the sophistication withEnglishand withwritten
contractsneeded to understand fullywhattheymightbe agreeingto:
"[T]he [treaty]system contained major flaws. ... Chiefs who signed
treaties
didnotalwaysunderstand whattheyhadagreedto. 'Boone came
out and got themto signa paper,' recalledthe ArapahoLittleRaven,
'buttheydidnotknowwhatitmeant.'Oftensuchmisunderstanding had
no moresinisterexplanationthansimplya bad interpreter.''26
PropertyRightsImpediments. Also importantwould be the natureof
property heldbyIndiansrelativetothosedesiredbywhites.Whites
rights
mightearnestlyseek to negotiateforpeacefulacquisitionof resources.
But purchasingrightsrequiresthatsomeonebe able to sell them.If a
tribehad a systemof well-definedrightsrecognizedamongthemselves
andothertribes,Indiansindeedhad something ofvalueto sell,andnego-
tiationwithwhiteswouldbe feasible.Conversely,
immigrants wouldfind
negotiationverycostlywhere nomadic tribeshuntedover largeterrito-
25 Cooter & Rubinfeld,supra note 12, at 1070. The frequencyof settlementover trial
apparentlyrises as disputes involve multipleparties. Gary M. Fournier & Thomas M.
Zuehlke, Litigationand Settlement:An Empirical Approach, 71 Rev. Econ. & Statistics
189, 194 (1989).
26
Robert M. Utley, The Indian Frontierof the American West, 1846-1890, at 43-44
(1984).
ries,whereno one tribehad recognizedrightsto excludeothers,and

whererightsto thefruits oftheland-like bison-were governedsolely
by theruleoffirstpossession.Indiansthenwouldhavelittleor nothing
to offerin any negotiation,and whitescould obtainrightsonlyin the
ways Indiansthemselves did-by capture.
Theseproblemswouldbe further complicated on alien-
byrestrictions
ability.Even Indian tribeswith well-specified
propertyrightsamong
themselves oftenhad restrictions Rightsthatcannot
on transferability.
be exchangedwithinor acrossculturesnaturally raisenegotiation
costs,
reducethesurplusfromnegotiation, ofwar.
and increasetheprobability
3. CollectiveActionand PublicChoice
The analogybetweencontracts andtreatiesto avoid
to settlelitigation
warfare is usefulbutimprecise.Individuals makesettlementcontracts or
on theirownbehalf;treatiesare madeorwarfare
litigate wagedon behalf
ofgroupsin a publicchoicesetting, betweenrepresentatives fromeach
group.Whilea settlement contractmustmakeall partiesbetteroffand
leavesthemworseoff,thesameis notnecessarily
litigation trueoftreat-
ies and warfare.
Agency Costs and EnforcementProblems. Treaties often create a
Prisoner'sDilemma.Even if thetotalbenefits froma treatyexceed its
totalcosts forboth sides, any particularindividualmayfindit in his
interest withinthecollec-
to violatethetreatyterms:"[T]he individuals
[tobe boundbya treaty]
tivities mayormaynothavegiventheirconsent
to thearrangements enteredintoby theirgovernments and mayor may
not benefitfromthe treatyprovisions. . . . A monarch,for example,
maymakepromisesthatimposesignificant costson hisownpeople.The
monarchmay not be able to obtainthe neededcooperationfromthe
These agency-cost
populace.""27 problemsconcerning treatyenforceabil-
ityhavethesameeffect as thelackofexchangeable property men-
rights
tionedabove. Like the inability to tradedefinedrights,an inability
to
enforceagreements to tradereducesnegotiation surplusand increases
thelikelihoodofwar.
CoalitionCosts. The cost-of-negotiation and cost-of-wartermsin
equation(6) willdepend also on the relative
transactioncostsofforming
thecoalitionsrequiredto tradeor to raid.28Coalitioncosts usuallyare
27 JenniferRoback, Exchange, Sovereignty,and Indian-AngloRelations, in Property
Rightsand Indian Economies 7 (TerryL. Andersoned. 1992).
28 For a discussion of coalitionscalled "land claims associations" thatenforced
property
rightson the frontier,see TerryL. Anderson & Peter J. Hill, The Evolution of Property
Rights: A Study of the American West, 18 J. Law & Econ. 163 (1975). Umbeck, supra
note 8, at 47, furtherdiscusses the relationshipbetween transactioncosts and coalitions.
RAID OR TRADE? 51
nottreatedas important elementsin thesettlement-litigation literature,

although theyareobviouslyrelevant insomecontexts(forexample,class
actions).Yet bothnegotiation and warfare are conducted,not
ordinarily
by theentiregroupaffected, butby representatives. Use ofrepresenta-
tives,or agents,lowersthecostsofresolving disputes.
Oneobserves,however,important differences betweennegotiation and
violenceintheuse ofagentstolowertransaction costs.Typically, negoti-
ationis conductedon behalfofentiresocietiesthrough theuse ofa hand-
fulofspecializednegotiators,makingitscostsnegligible. Warordinarily
is undertaken notby smallteamsof representatives butby muchlarger
groups(armies),numbering traditionallyin the thousandsor, morere-
cently,millions.
Since war ordinarily
is not undertaken by representatives in small
groups, therelevanttransaction costs must includethe costofamassing
militaryforces.Whitesused twoprincipal arrangements to fightIndians,
part-time militia
made up of local citizensand a standing nationalarmy
madeup offull-time professionals. Use ofa full-time,professional army
raisesthe fixedcosts but lowersmarginalcosts of warfareand so in-
creasesitslikelihood.29
Incidence of Fighting Costs. Finally, attemptsto predict peace or
warmustrecognizethatthesedecisionsaremadebygovernment officials
and triballeaders.Justas disputeresolutionbyjudicial trial
is a "nega-
tive-sum gameforthe disputants, graftedontocollectivechoiceby an
impartialcourt,"30waris a negative-sum gamegrafted ontoa collective
choicemade by politiciansand bureaucrats(including military person-
nel). Rationalavoidanceof negative-sum situationspresumesthatthe
personsdecidingbetweennegotiation (settlement) and violence(litiga-
tion) bear therelevantcosts. Where decisions
political are made,how-
ever,individualsorcoalitionscan benefit
themselves byshifting thecosts
of warto others,meaningthattherelevantpoliticalactorsmayunder-
value CF in equation(6). In otherwords,warfarethatis negativesum
overallmaybe value enhancing forinfluentialpersonsor groups.If so,
raiding will become more common relative to trading,for political
reasons.31
29 Differentialcosts of assemblingfightingforcesare not capturedby equation (6). War's

gains and losses to one side depend in part on the other side's abilityto organize. With
zero transactioncosts, militarycoalitions can forminstantaneously,and therewill be no
differentialin the gains to eitherside fromforminga coalition. Withpositive organization
costs, however, there will be highergains from using violence for the side with lower
marginalcosts.
30 Cooter & Rubinfeld,supra note 12, at 1071.
31 This implicationparallelsthatfromthe settlement-litigationliterature:litigationwillbe
chosen more frequentlywhen courtcosts can be shiftedfromone partyto another.
In thisrespect,theexistenceofa standing nationalarmyis againimpor-

tant.Whensettlersdecide to encroachon Indianterritory and a local
citizenmilitiaprovidesthe military force,thecongruence betweenthe
gainsfromtrespassand thepotentialcostsoffighting is relatively
high.
However,ifa smallgroupcan call on a standing armycomposedmostly
ofoutsidersand compensated fromgeneraltax receipts,thecongruence
betweengainsand costs is lost. The incentiveincreasesfor"political"
wars,whereby wealthis createdforone groupat theexpenseofanother.
As ThomasJefferson noted,"[T]he U.S. findsan Indianwartoo serious
a thing,
to riskincurringone merelyto gratifya fewintruders withsettle-
mentswhichare to cost the otherinhabitants of the U.S. a thousand
timestheirvaluein taxesforcarrying on thewartheyproduce.'"32
Moreover,the shiftfrompart-time militiato a full-timearmyalters
members'incentives,as Adam Smithrecognized. "In a militia,the
character ofthelabourer,artificer,
or tradesman, predominates overthat
ofthesoldier:in a standing army,thatofthesoldierpredominates over
everyothercharacter.'"33A standing armycreatesa class ofprofessional
soldierswhosepersonalwelfareincreaseswithwarfare, eveniffightingis
a negative-sum actforthepopulation as a whole.Formilitary bureaucrats
(typicallythehighest-ranking soldiers),warfareincreasesbudgets.War
meanspotentialdistinction forsoldiersin the field,morepromotions,
and simplyrelieffromboredom.Particularly whenthearmyhas political
influence,therefore,a fighting willincreasethenumber
full-time force of
disputes resolved violently.
D. Testable Implications
The modelof raidingversustradingpresentedhereyieldsfivemain
hypotheses.
1. Zone of Controversy
Disputesoverresourcespredictably willnotoccurat thefirstpointof
contactbetweenwhitesand Indians.Nor willdisputescontinueto the
pointwhereall resourcesare ownedby one groupor the other.The
zone of controversyis boundedat bothends. Thus,thehistory of two
contendinggroups'relationswould notbe one of
longsaga warfare, much
less "extermination"or "annihilation."
Withinthe zone of controversy, negotiatedoutcomeswill dominate
hold.Decisionsto relyon nega-
violentonesas longas certainconditions
32 Letter quoted in
Prucha, supra note 13, at 139.
33Adam Smith,The Wealth of Nations 660 (Edwin Cannan ed. 1937).
RAID OR TRADE? 53
tive-sum solutionsto disputescan be tracedto some "contractfailure"

in the negotiation
process.Putativeexplanations of increasedviolence
based on ideologyare neitherhelpfulnornecessary.In thenegotiation-
warfare context,severallikely"failures"can be identified
a priori.
2. Informational Asymmetry
Moredisputeswilldegenerate intoviolence,ceterisparibus,whenthe
twosidesdiffer aboutexpectedoutcomesoffighting. Differentexpecta-
tionsmaybe due to differences in information.
Additionalcontactbe-
tweenwhitesand Indiansundoubtedly increasedtheinformationavail-
able to each. But contactwas continuallybeingmadewithnewtribesin
newterritories, thusraisingtheprospectsforinformation asymmetry.
3. MilitaryTechnology
A likelysourceof information
asymmetryis thedevelopment ofnew
weaponsby one side. New weaponsmaycause hostilitiesif the other
sideis notwellinformedabouttheirimpact.
4. Property Rights
For tradeto occur,property rightsmustbe wellspecified and divesti-
ble, and agreementsenforceable.Otherwise, increasedtransactioncosts
willreducethe surplusfromnegotiation and increasethelikelihoodof
conflict.Agriculturaltribeshad property rightsspecifiedin ways that
madenegotiation less costly.Conversely, nomadictribesreliedmoreon
theruleof captureoverlargehunting hence,disputesettle-
territories;
mentwiththesetribeswouldbe morecostlyand so entailgreateruse of
force.Moreover,as opposinggroupsencounter agency-costproblems in
enforcing agreements, incentives
to tradeproperty decline
rights and the
likelihoodoffighting
increases.
5. StandingArmyversusMilitia
A standing armylowersthe incremental costs of assemblingfighting
coalitions, the
decreasing marginal costsofwar and shrinkingthesurplus
fromnegotiation. The riseofa standing
armyalso createspoliticalincen-
tivesthatincreasethelikelihoodoffighting
toresolvedisputes.Forexam-
ple, a careerarmycreatesindividualincentivesamongsome military
personnel tofight.
A nationalarmyalso meansthatwell-organizedgroups
can diffuse thecost offighting
overthelargertax-paying populace.
III. EMPIRICAL EVIDENCE
A. Zone of Controversy
Figure1 showedthattherewouldbe zones withinwhichcontroversy
over land ownershipdid not arise. Initially,land wouldnot be worth
Indians'fighting to protect.Andindeed,thereis evidencethatIndiansat
firstwerepreparedto accede to whites'assertionof landclaimsrather
thandefendthem.In 1625,forexample,New Englandcolonistsasked
thePemaquidtribeto givethem12,000acres of Pemaquidland,which
thetribedidin "thefirstdeed ofIndianlandto Englishcolonists."34 As
RobertUtleydescribesconditionson the GreatPlainsuntilaboutthe
timeof theMexicanWar,whiteintrusions werenotworththeIndians'
whiletostop,although whites'behaviorwas "sometimes reprehensible."
"Neitherraceposedmuchofa threattotheother,andon thewholethey
gotalongfairly well.""35
At theotherend of the spectrum, a rationalpolicywillnotgo as far
as completepossessionofall landby one side or theother.Even ifone
sideis militarilydominant,relationsbetweenthegroupspredictably will
resultin the losers owningsome land, whose value to the winnersis
slightrelativeto thecostsofitsbeingtaken.And,infact,thetwoprinci-
pal featuresof nineteenth-century Indianland policy-removalof the
easterntribesand creationofreservations forwesterntribes-werecon-
ceivedand designedspecifically as a wayofplacingIndianson landthat
was ofrelatively low value,inorderto avoidcostlyconflictswithwhites.
Thoughpopularlyportrayed as an act of sheercruelty,theJacksonian
policyofremoving theFive CivilizedTribesfromtheSoutheastto Okla-
homaactuallywas motivated bya recognitionthatIndiansmustbe placed
outsidethezoneofcontroversy withwhitesorbe eliminated altogether.36
Westernreservationslikewisewere supposedto "let the oncoming
34 Brown, supra note 3, at 3.

35 Robert M. Utley, Frontiersmenin Blue: The United States Army and the Indian,
1848-1865,at 59 (1967).
36 For a general discussion, see Roback, supra note 27. As a soldier,Andrew Jackson
"was responsiblefordrivingout white settlers[thatintrudedon Indian lands], destroying
theircabins, and drivingaway theirlivestock.Jacksoneven suggestedthattheArmyemploy
Indian troops to assist drivingout white settlers,a suggestionthat the War Department
eventuallyused." Id. at 19-20. But Jackson and other states-rights supporterslike John
Calhoun ultimatelyconcluded thatIndian propertyrightssimplycould not be enforcedin
the Southeast and thus that removal "to place the entireIndian nationoutside the reach
of any of the states" was necessary. "An added benefitfromthis approach was thatthe
Indians mighthave an opportunityto develop as a people, withoutthe interferenceof
whites." Calhoun himself"was convinced thatremoval was the only way forthe Indians
to avoid extinction."Id. at 21.
RAID OR TRADE? 55
[white]settlements
flowby,leavingbehindislandsofIndiansin a sea of
whites."'37
Decisionsto removeand to settleIndianson reservations indicatethat
theeconomicmodelbasedon thecostsandbenefits oftakingland,rather
thansomemonolithic modelof "exterminating" or "annihilating" Indi-
ans, better accountsforthe patternof Indian-white relations.Indeed,
whiteswhooriginated thereservation policybelievedthatIndianscould
notsurviveincreasing whiteencroachment unlesssomeportionof land
was set aside forthemexclusively.38 Indiansthemselves apparently did
notperceivethewarsofthenineteenth century to be about theirextermi-
nationso muchas theirsettlement on reservations.39
Withinthezone of controversy, negotiated outcomespredictably will
outnumber thoseresolvedbyconflict,as violenceis a negative-sum prop-
osition.Historiansgenerally agreethattrading dominated raidingin the
history of Indian-white Jennifer
relations.40 Roback summarizes Indian-
whiterelationsin colonialtimes:"Europeansgenerallyacknowledged
thattheIndiansretainedpossessoryrightsto theirlands.More impor-
tantly,theEnglishrecognizedtheadvantageof beingon friendly terms
withtheIndians.Trade withthe Indians,especiallythefurtrade,was
profitable.Warwas costly."41 Even aftertheFrenchandIndianWar,by
whichtheEnglishdeemedthemselves to havewonFrenchrights to land
in theNew World,"therewas no assumption thatIndianrightsin the
landsclaimedby Francehad been extinguished. Although Indianrights
wereless formaland less fundamental in Europeaneyes thanEuropean
claims,theynevertheless didexistas thesubjectforpurchase,fornegoti-
ation,or forretention."42
The legal doctrinethatguidedU.S. policytowardIndiansin thelate
eighteenth and earlynineteenth
centuries"recognizedtheIndians'right
to use and occupyland. Underthistitle,the UnitedStatesis liableto
pay the tribewhenit decides to extinguish the Indianuse and occu-
37 Utley,supranote35, at 76.
38 "[T]he reservation policycalledforconcentratingtheIndianson small,well-defined
tractsofland,protecting themfromwhitecontamination." Utley,supranote26,at46. See
also note36 supra.
39 "[T]he Plainswarscentered on theissueofwhether
chiefly or nottribeswereto live
on reservations." Utley,supranote26, at 173."[W]arfare [betweenIndiansand whites]
endedin 1886at SkeletonCanyon,Arizonawiththecollapseofthelastarmed[Apache]
resistanceto thereservation system."Id. at 257.
40 "Moreoftenthangenerally appreciated,thecontact[between Indiansandwhites]was
evenfriendly, or at leastpeaceful."Utley,supranote26, at xx.
41 Roback,supra note 27, at 11. The attraction of contractrelativeto violencewas
enhancedbythecrown'screationoflocal monopolies forlandtradewithIndians.
42
Washburn, supranote5, at 49.
pancy."43In supporting Indianland rights,Jefferson assertedthatthe

UnitedStateshad a "sole and exclusiverightto purchasing fromthem
whenever ThismadetheUnitedStates
theyshouldbe willingto sell.""44
a monopsonistic purchaserbutdidnotprovide"any dominion, orjuris-
orparamountship
diction, whatever, butmerely inthenatureofa remain-
der aftertheextinguishment of a presentright,whichgave us no pres-
entrightwhatever,butof preventing othernationsfromtakingposses-
sion,and so our
defeating expectancy; thattheIndianshadthefull,undi-
videdand independent sovereignty longas theychoseto keepit,and
as
thatthismightbe forever.'45Jefferson foundthatland acquisitionby
negotiationhadbeen the norm and thatland werenotextensive.46
takings
FelixCohen,perhapsthemostthorough legalscholarofIndianproperty
referred
rights, to thisearlyperiod as one of "fair By 1947,
dealing."47
he estimated,some $800 millionhad been paid forIndianlands,and
paying"$800,000,000 fora principleis nota commonoccurrence in the
world's history."'
48
WheretrespassontoIndianlandsdid occurduringthelate eighteenth
and earlynineteenth thepolicyof thegovern-
it was initially
centuries,
andto expelwhiteintruders.49
mentto protectIndianrights Duringthese
43 Kirke Kickingbird& Karen Ducheneaux, One HundredMillionAcres 7 (1973).

4 Quoted in Washburn,supra note 5, at 56.
45 Quoted in id. at 56.
46 "That the lands of thiscountrywere takenfromthem[Indians]by conquest, is not so
general a truthas is supposed. I findin our historiansand records, repeated proofs of
purchase, which cover a considerable part of the lower country;and many more would
doubtless be found on furthersearch. The upper countrywe know has been acquired
altogetherby purchasesmade in the mostunexceptionableform."Thomas Jefferson, Notes
on the State of Virginia(1787) 96 (1955).
47 Felix Cohen, OriginalIndian Title, 32 Minn. L. Rev. 28, 32 (1947).
48 Id. at 46. See also Russell, supra note 4, at 63: "Much of world historytells of the
movementsof peoples thatinfringeon otherpeoples. Rarely have the infringed upon been
treatedwithmoreconsiderationand humanenessthanwas theAmericanIndian." As noted
above, though,preponderanceof force will alter the termsof trade received by the less
powerfulparty. Scott Wood shows empiricallythat in 1825-95 increasingthe numberof
white troops in the region where a tribe lived reduced the price received by Indians in
treatiesforthe sale of theirland. He concludes that"an increase of 100 troopscauses the
percentfairmarketvalue to decrease by 2.2 percentagepoints." Scott Alan Wood, The
Elasticityof Force: Determinantsof Terms of Trade in AmericanIndian Treaties (unpub-
lished M.S. thesis, Montana State Univ. 1992).
49 See Secretaryof War WilliamH. Crawford'sMemo to MilitaryCommanders,January
27, 1816,quoted in Prucha,supra note 13, at 139: "Intrusionsupon thelands of thefriendly
Indian tribes[are] not only a violationof the laws, but in directoppositionto the policyof
thegovernmenttowardsits savage neighbors.Upon applicationof any Indian agent,stating
that intrusionsof this nature have been committed,and are continued,the Presidentre-
quires, thatthey shall be equally removed, and theirhouse and improvementsdestroyed
by militaryforce;and thateveryattemptto return,shall be repressedin the same manner."
RAID OR TRADE? 57
early years, U.S. troops were respected by the Indians who saw them
not as aggressorsbut as protectorsof Indian rights."[M]ilitaryforces
withinthe Indian lands were more a protectionthan a threatand did not
forma wedge forwhitesto intrudeinto the forbiddenlands."''5
The claims of the historicalschool maintainingthatIndian-whiterela-
tions in this countrywere fromstartto finishdeterminedby violence
thusappear erroneous.51The implicationsof the economic model appear
bettercorroborated.Initially,Indians were often disinclinedto assert
land claims when whites intruded.If claims were asserted, however,
negotiationratherthanfighting was typicallythe outcome.52The implica-
tionthatnegotiationdominatedin the earlyyears of whiteintrusiononto
Indian land can be evaluated more systematically.Table 1 shows the
number of battles and treaties between Indians and whites fromthe
foundingof the United States to the end of the nineteenthcentury.Until
1830,fighting was comparativelyrare, and treatiesfrequent.53
However, use of violence to settlerightsto resources claimedby Indi-
ans and whiteswas increasingthroughoutthe nineteenthcentury,as Ta-
ble 1 also shows. Althoughbattles between Indians and whites at first
were fewer than treaties negotiated,this patternwas reversed as the
nineteenthcenturyprogressed; ultimatelywarfarebecame the principal
50 Prucha, supra note 13, at 145-46.

51 While refuted,this view of white-Indianrelationsis more understandablewhen inter-
play between credible force and violence is betterunderstood. Consider the arguments
raised by those who professedto recognize Indian propertyrightsin the Southeastyetwho
favoredIndians being forciblyremoved fromthe East to the new Indian Territorywest of
theMississippi.To them,removalwas a choice forIndiansto make,involving"the principle
thatno emigrationtake place withoutthe willingconsentof the Indians involved.The tribes
affectedmustbe presentedwitha choice between two equal alternatives:to go West, with
titleto the lands in the new location guaranteed;or to remainwheretheywere, again with
all propertyand civil rightsprotectedby thegovernment."Brian W. Dippie, The Vanishing
American:WhiteAttitudesand U.S. Indian Policy 67 (1982). In principle,the choice would
respect Indian propertyrights.But it had been amplydemonstratedas well thatthe value
of those rightswas fallingbecause whitegovernmentswere unable to keep theircitizens
off Indian property.Thus, the solution ultimatelychosen by Indians was a contractual
one-constrained by the changingvalue of Indian propertyrightsbecause of the increasing
abilityof whites simplyto take ratherthan negotiate.
52 By
militarystandards,the typicalfightwas relativelyminor.As one historiansumma-
rizes, "Reasonably accurate figuresare available forthe numberof engagementsbetween
the armyand Indians forcasualties to the troops. . . . [Whitelosses average] out to a little
over three casualties a fight.. . . [A] soldier in the cavalry or infantrycould expect-
statisticallyspeaking-to take part in about one fightduringeach five-yearenlistment.
[Indian losses averaged] only fourIndians killed in each fight."Russell, supra note 4, at
47.
53 Table 1, includingonly Indian battles and agreementswith the federalgovernment,
understatesthe extentof both fighting and negotiation.Understatement is doubtlessgreater
in earlieryears, when both battles and agreementswere more likelyto involve nonfederal
(state or local) governmentsor groups.
TABLE 1
BATTLESANDTREATIES,1790-1897
INDIAN-WHITE
Numberof Numberof
Year Battles Treaties
1790-99 7 10
1800-1809 0 30
1810-19 33 35
1820-29 1 51
1830-39 63 84
1840-49 53 18
1850-59 190 58
1860-69 786 61
1870-79 530 0
1880-89 131 0
1890-97 13 0
SOURCES.-For battles,see DepartmentofWarAnnual

Reports, 1840-1897;
Adjunct General'sOffice
Chronologi-
cal ListofActions,&c. withIndiansfromJan.1 1866to
Jan.1 1891;ArmyWar College,Compilation of Indian
Engagements fromJanuary1837to January1865.For
see IndianTreaties,1778-1883(CharlesJ. Kap-
treaties,
plered. 1972).
way of resolvingcontroversy.In fact, Congress voted in 1871 not to

ratifyany more Indian treaties.54
Ifbothsidesprefer
settlements
to violence,whatcausedtheincreasing
betweenIndiansandwhites?The economicmodelpre-
resortto warfare
sentedhere suggestsseveral answers.
B. InformationAsymmetries
Equation(6) showsthatfightingis morelikelytooccuras theprobabili-
tiesplacedon theoutcomeoffighting diverge.Indians'and whites'own
behaviorindicatesthateach side understood thebenefitsof opponents'
possessingaccurateinformationabouttheoutcomeof anyfighting. Al-
mostfromtheday whitesarrivedin theNew World,forexample,they
shippedIndians back to Europe to impressthemwiththe extentof white
them"withthe expectation
and population,thenreturned
technology
thatupon theirreturntheywould spreadthegospel of European superior-
ity throughouttheirnative villages.""55 Whites frequentlydemonstrated
54 This was part of Congress's effortto exert legislativepower duringReconstruction.

For a discussionof how thisrelatedto Indian relations,see ch. 6 of Russel Lawrence Barsh
& JamesYoungblood Henderson, The Road: Indian Tribes and Political Liberty(1980).
55 James Axtell, ThroughAnotherGlass Darkly: Early Indian Views of Europeans, in
AfterColumbus: Essays in the Ethnohistoryof Colonial NorthAmerica 140 (1988).
RAID OR TRADE? 59
theirtechnologypeacefullyto impressIndians withthe pointlessnessof

war.56
As the frontiermoved west, however, informationasymmetriesin-
creased, forseveral reasons. Since westernIndians were more nomadic,
it was more difficult forwhitesto communicatewithan entiretribe.To
be sure, nomadic plains Indians regularlywere taken to Washingtonto
be impressedby the power of the federalgovernmentand the growing
whitepopulation,but the information did not always filterdown to wan-
dering bands or was simply not believed. On the whiteside, the different
landscape and climate on the plains resulted in Indian warfaretactics
different fromwhat whites had encounteredpreviously. And Indians'
nomadic existence meant that whites oftenhad poor information about
the numberof hostiles opposing them.
In fact,one side's faultyinformation seems to have been an important
factorinjust about all the bloody fighting in the West. The Plains Indians
"greatly favored the sendingfortha small partyto en-
decoy tactic,""57
counter a white detachment(seeminglyby mistake) and then running
fromit to lure pursuingwhites into a trap where far more numerous
Indian warriorslay hidden. Thus, in the notoriousFettermanMassacre
in 1866, eighty-onebluecoats were enticed into combat with some two
thousandSioux and wiped out. George Custer's apparentfoolhardiness
in attackingover three thousand Sioux and Cheyenne withjust a few
hundredmen at the Little Bighornin 1876 simplyreflectshis ignorance
of the truenumberof Indians opposing him.58
56 AfterSittingBull's Sioux band fledto Canada, he sent a delegationback to the States
to discuss the possibilityof returning.The Indians
were deeply interestedin various activitiessouthof the border,such as bridge-buildingand
long-rangeriflepractice, but they seemed especially impressedby the telegraphand tele-
phone. [GeneralMiles] decided to workon this.He had blanketsdrapedacross thewindows
of thetelegraphofficein orderthattheymightsee the sparkleap fromthe key to thecontact
point. This was shrewd,because afterwatchingthe spark for a while theyagreed among
themselvesthatit exceeded the best medicineof the Sioux.
Miles then demonstratedthe frightful power of the telephone. Half of the visitorswere
escortedto a house some distanceaway, a phone was crankedup, and theywere instructed
to talk to each other. When they recognized the voices of distantfriendsspeaking the
Dakota language, he says, "huge drops of perspirationcoursed down theirbronze faces
and withtrembling hand theylaid theinstrument down." These were menwho had endured
the tortureof the Sun Dance and had been ready to give theirlives at the Little Bighorn,
but afterthis horrifying
experience theybecame urgentadvocates of peace.
Evan S. Connell, Son of the MorningStar 218 (1984). SittingBull's own introductionto
the telephonelefthim "gravely shocked" (id.).
57 Utley, supra note 26, at 105.
58 For a discussion of Custer's unusuallyfaultyinformationabout the Indians' strength,
see Connell,supra note 56, at 263-64. Roy Morrisrefersto "the greatconvocationof forces
thatultimatelyhad misledCuster intoattackinga superiorenemy" as a "once-in-a-lifetime
occurrence." Roy Morris,Jr.,Sheridan: The Life and Wars of General Phil Sheridan363
(1992).
C. Changing Technology
In termsof equation (6) above, Indians mightsometimeshave been
undulyoptimisticabout winningwhen information about new weapons
was unavailable. Over time,whites' warfaretechnologyimproved,with
the introduction of breech-loadingand thenrepeatingrifles,forexample.
Still,while Indian and whitewar technologieswere oftendifferent, it is
not obvious thatone side or the otherhad systematicallybettertechnol-
ogy. In the early years, Indians' bows and arrows were a match for
whites' muskets.In later years, whites' technologyimprovedmarkedly,
as fast-loadingrifleswere invented. But this did not necessarily give
whites any systematicadvantage. Indians usually were able to obtain
new weapons (fromboth privatetradersand even the Bureau of Indian
Affairs'reservationagents) almost as soon as they were available to
whites.Cash paymentsto reservationIndians fromthe government,plus
paymentsto privatebuyers for hides, providedfundsused to purchase
riflesand ammunition."As Custer's troopsdiscovered,whitetechnology
was not always superiorand certainlywas not enoughto guaranteesuc-
cess againstlarge numbers.Even againstreverseodds, General William
Sherman stated that "fiftyIndians could checkmate three thousand
troops.",60 Whateveradvantage whitespossessed withfirearmswas bal-
anced by Indians' superiorhorsemanship."Frontierarmyofficersoften
called the horse warriorsthe finestlightcavalryin the world,and histori-
ans have repeated the judgmentever since."61 Even when U.S. troops
finallycaught up with Chief Joseph's Nez Perc6-starving, frozen,and
exhausted fromtheir long flighttoward Canada-the battle lasted for
several days beforethe Indians surrendered.
But theissue is notwhethereitherside's technologywas systematically
betteror worse; any differencewould alter only the termsof trade, not
thepropensityto fightor negotiate.Rather,the questionis whethertech-
nological change on one side was unknownor underestimatedby the
other.For example, at the Wagon Box Fightin 1867, Sioux losses were
extraordinarily heavy. "[O]ne chiefplaced themat 1,137,and called the
battlea 'medicinefight'-meaningthatthe soldiershad had supernatural
help. What the soldiers had were new Springfieldbreech-loadingrifles
59 Morris,supra note 58, at 348.
6 Quoted in Angie Debo, A Historyof the Indians of the United States 221 (1989).
61 Utley,supra note 35, at 7. See also WalterPrescottWebb, The GreatPlains 169(1931):
"It took the Texan a minuteto reload his weapon; the Indian could in thattimeride three
hundredyards and dischargetwentyarrows. The Texan had to dismountin order to use
at all, and it was his mostreliableweapon; the Indianremainedmounted
his rifleeffectively
throughoutthe combat."
RAID OR TRADE? 61
and plentyofammunition, whiletheIndianswereusingtheold muzzle-

loaders.'"62Whites'introduction
of othernewweapons,suchas there-
volver,producedsimilarly costlyIndianmiscalculations.63
The importance ofchanging whitetechnology can be testedbyexamin-
ingtheratioof whitesto Indianskilledin battleovertime.Systematic
technological improvementsby one side or theotherwouldhavean am-
biguouseffecton theabsolutenumberofdeaths.6Whereasbetterwhite
technology shoulddecreasetheratioof whiteto Indiandeathsin those
battlesthatoccurred,the availabledata indicatethattherewas no sig-
nificantchangein the ratioof whiteto Indianbattledeathsovertime.
Whenthedatafrom1850to 1891(theonlyyearsforwhichestimatesof
bothwhiteand Indianmilitary deathsare available)are dividedin half,
themeanratioof whiteto Indiandeathsfalls,butthedifference is not
(t = .96).65 Thus, measuredby the ratioof deaths,
statisticallysignificant
thehypothesis thattechnological changewas a significant
factorin the
increasing resortto battleduringthistimeis notcorroborated.
Multivari-
ate testsalso failto corroborate
thehypothesis.66
D. PropertyRights and Other TransactionCost Problems

The costs of negotiatedexchangedeclinewhenone partyhas well-
defined,divestible
property rightsintheresourcesdemandedbyanother.
Whenwhitesencountered a tribewithwell-defined rightsin land,their
incentiveto trade withIndians would increase.Alternatively, when
whitesencountered a tribewithoutwell-definedrights,they would have
no alternative
butto raid.
In thisregard,therewereimportant differences
betweenIndiantribes
east and westoftheMississippi.In theEast, whereagriculture was the
principalcommercial activity,thebenefits
to were
privateownership rela-
62 Charles Edward
Chapel, Guns of the Old West 259 (1961).
63 Webb, supra note 61, at 167-79.
64 Better technologywould make whites more eager to fight,but Indians less eager.
Indians would simplyconcede greaternumbersof takingswithoutfighting or accept worse
termsof trade in negotiation.Thus, the effectof bettertechnologyon the totalamountof
warfareis unpredictable,a priori.
65 The ratiofallsfrom2.34 in the first
periodto .519 in the second. Even whenone outlier
in the second period is removed, causing the ratio to fall to .396, the differenceis not
significant(t = 1.03). The outlieris 1876, when Custer's Last Stand made the ratio (2.5),
over six timesabove the mean forthe otheryears.
66
The annual ratio of Indian to white deaths was regressedon various combinationsof
a time-trend variable, a lagged variable forthe death ratio,and dummiesforthe years that
differentnew weapons were introduced.(This is essentiallythe same model used success-
fullyto test the importanceof a standingarmyin Tables 3-5 infra.)In no instancewas the
weapon dummysignificant.
tivelygreat.Privateproperty
thuswas wellestablished:"The Creektown
is typicalof the economicand social lifeof thepopuloustribesof the
Southeast. ... [E]ach familygatheredthe produce of its own plot and
placedit in its own storehouse.Each also contributed voluntarilyto a
publicstorewhichwas keptin a largebuilding in thefieldand was used
underthe directionof the townchiefforpublicneeds. The Cherokee
townhad a similareconomic,social,and politicalorganization."67
Institutionsin Indianterritory westof theMississippiweredifferent,
however,becausetheEuropeans'introduction ofthehorseincreasedthe
yieldavailablefromthevastwandering herdsofbison.Manyofthegreat
nomadichunting and warriortribesof the Westwereinitially eastern,
sedentary, and agricultural. They abandonedfarming and movedwest
forthehunting.68 For the nomadictribes,land and theresourceson it
wereeffectively a vastcommons,becausebenefits ofprivateownership
wereless thanforagricultural tribes,and thecostsofenforcing anyland
claimscomparatively great. Not therefore,
surprisingly, white western
migration did not intrudeon an equilibrium of
system aboriginal rights
recognized by Indiansthemselves"but ratherbrokeovera congeriesof
scatteredgroupsthathad beenfighting one anotherforgenerations and
wouldcontinueto fight one anotherto thedayoftheirfinalconquestby
thewhites.'"69Moreoftenthanintheeast,whitesinthewestfoundtribes
withno effective ownershipof land; theonlyrightswereusufruct and
obtainedby captureand possession.One wouldpredict,therefore, that
whitesdesiring resourcesused by westernnomadictribeswouldsimply
takethemmoreoftenthantheywouldtakeresourcesownedby eastern
agriculturaltribes.
67 Debo, supra note 60, at 13-14.

68 "As lifeon the Plains became moreinviting
withthe use of horses,moretribesmoved
out there, the Sioux and Cheyennes and Arapahos fromthe east, the Comanches and
Kiowas fromthe west. Some abandoned theiragricultureentirelyand based theireconomy
on the buffaloherds-'We lost the corn,' say the Cheyennes.Otherslike the Osages main-
tainedtheirfixedresidences,wheretheyplantedtheircrops, rode out to the Plains fortheir
supplyof meat, and returnedto harvesttheircorn and settledown forthe winter."Id. at
15.
69
Utley,supra note 26, at 11. A principalsource of the continuouswarfareamongIndian
tribeswas the factthatmajor huntinggroundsclaimed by one tribeoverlappedwiththose
claimed by another.Thus, the beliefthatwhitemigrationgenerallydislodgedIndians from
centuries-oldancestrallands is ofteninaccurate.The horse and thegun (whichbotharrived
in the West well before major white incursions)had greatlyaltered the configuration of
land use and possession among Indian tribes. As one Sioux chief declared to his white
conquerors,"You have splitmyland and I don't like it. These lands once belongedto the
Kiowas and the Crows, but we whippedthese nationsout of them,and in thiswe did what
the whitemen do when theywant the lands of Indians." Quoted in id. at 61.
RAID OR TRADE? 63
Similarly,therewereimportant differences
betweeneasternandwest-
erntribesaffecting ofnegotiated
enforceability outcomes.Easterntribes,
withtheirorderedsystemsof property ownership, also tendedto have
politicalstructuresallowingtribalrepresentativesto make agreements
withoutsidersthatwouldbindtheentiretribe.For example,amongthe
so-calledcivilizedtribesoftheSoutheast(Cherokee,Chickasaw,Choc-
taw, and Creek),decisionsaffecting the social unit(tribeor subtribe)
were discussed, debated, and negotiatedpublicly.Decisions finally
reachedinternally werethenthebasis of negotiations withoutsiders,it
beingunderstood thatall Indianswereboundby whatwas agreedto by
theirrepresentatives.7"
As thezone of controversy shiftedwestward,however,muchof the
growingIndian-white violencecouldbe tracedto agencycoststhatmade
negotiatedoutcomesunenforceable. Mosttreaty werecommit-
violations
ted "not by theleadersof theUnitedStatesor of theIndiantribesbut
ratherby membersof thesegroupswho couldnotbe controlled by the
leadership,or more accurately,who could be controlledonly at ex-
tremelyhighcost."" On theIndianside,chiefsalmostneverconstrained
individualwarriors.The Nez Perc6warriorwas typical;he "accorded
hisloyaltyand allegiancefirst
to hisfamily,
thento hisband,and finally
to his tribe,but rarelybeyond. . . . The autonomous bands looked to
chiefsandheadmenwhocounseledbutdidnotcommand.... [Warriors]
obeyedordisobeyedas personalinclination dictated,andcombatusually
tooktheformofan explosionofpersonalencounters ratherthana colli-
sionof organizedunits.... [C]hiefsrarelyrepresented theirpeopleas
fullyas whiteofficials
assumed, nor couldtheyenforce compliance ifthe
people did notwantto Individual
comply.""72 warriors frequentlyignored
thetreatiesthattheirchiefshad signed,bringing
retributionon thewhole
tribeor bandbywhites.The bloodySiouxuprising inMinnesotaandthe
massacreof Black Kettle'sCheyenneon theWashitaare twoinfamous
examples.73
70 See the Handbook of AmericanIndians (FrederickWebb Hodge ed. 1910); Bill Yenne,
Encyclopediaof NorthAmericanIndian Tribes(1985); 14 HistoryofIndian-WhiteRelations
(Victor E. Washburned. 1988).
71 Roback, supra note 27, at 5.
72
Utley, supra note 26, at 7-8, 44.
73The 1862 Sioux uprisingbegan when a group of Indian youthsmurderedfivewhites.
"The deed had not been planned. One had dared anotherto prove his courage." Id. at 78.
The Washita massacre occurredbecause Black Kettle, a Cheyennechiefwho persistently
arguedforpeace withwhites,"had a hard timekeepinghis youngmen undercontrol." Id.
at 125. When a group of braves slipped away to raid white settlements,theirtrailin the
snow led back to Black Kettle's village. Cavalry under General Custer followedthe trail,
stormedthe village, and killed over one hundredCheyenne,includingBlack Kettle.
On thewhiteside,similarproblemsabounded.Treatiessignedingood
faithbywhitepoliticiansprovedtobe unenforceable, as individual
whites
violatedthemwithimpunity. As notedabove,forexample,removalof
theFiveCivilizedTribeswas deemeddesirableas theonlywaytoprotect
Indiansfromwhites.The problemlay withthe nationalgovernment's
to defendlocal property
inability rightsagainstlocal whitecitizens-a
describedas "a massiveprincipal-agent
difficulty problem."74 The prob-
lemwentas farback as the Englishcolonialgovernment's to
inability
enforceits treatieswiththe Indiansagainstwhitedepredations in the
East75and plaguedAmericangovernment attemptsto resolveconflict
withthePlainsIndiansrightup to thefinalconfrontations in theWest.76
Also, government employeeswere notoriously faithlessagents,fre-
quentlydepriving tribesof theconsiderationdue themundertreaties.77
ReservationIndians' raidinglocal white settlements was frequently
viewednotas a treatyviolationbut as self-help in theface of whites'
breachof contractin failingto delivermonetary and in-kind payments
promisedundertreaties.78
74 Roback, supra note 27, at 19.
75 Lebergott,supra note 15, at 82-83, notes the following:
In 1768 Governor William Penn of Pennsylvaniaproposed the ultimatelaw. A flood of

migrantshad poured onto Indian lands in Redstone Creek and the Cheat River area. They
had been forciblyremoved by the soldiers, but soon there was "double the numberof
inhabitantsin those two Settlementsthanever was before." The governor,therefore,under
his royal powers, proclaimedthe death penaltyforanyone settlingon those Indian lands.
Failure to enforcethatlaw mighthave been anticipated.A few decades latersettlersin the
same regions once again disturbedthe Indians on their own territory.General George
Washingtonorderedthemremoved. Soldiers thendestroyedtheircabins. But withina few
monthsthe settlerswere once again back on "their" land.
76 Followingreportsof the discoveryof gold in the Sioux's Black Hills, "[t]he president
strictlyforbadewhiteintrusionsonto set-asideIndian lands, and [General]Sheridanissued
standingordersto burnwagon trains,destroyequipment,and arrestringleadersof any such
expeditions." But stanchingthe flowof gold seekers proved impossibleunderthe existing
conditions.Morris,supra note 58, at 348-49.
77 The referencescould be legion. "An insidious by-productof the treatysystemwas
the annuitysystem-the practice of payingforland withcash dispensed in annual install-
ments over a period of years. It was a systemhighlyvulnerableto abuse by politically
well-connectedtraders,who sat at disbursingtables each year to collect real or fictional
debts run up duringthe year by the Indians." Utley, supra note 26, at 45. The potential
forskimmingpaymentsowed to Indians made positionsas governmentIndian agentsvalu-
able in the late nineteenthcentury,and theywere frequentlyallocated by politicalpressure
and corruption.
78 "The raids continuedthroughout1872 and into 1873, motivatedin partby the govern-
ment's failureto supplythe reservationIndians withenoughfood and clothingto compen-
sate fortheirloss of huntingprivileges." Morris,supra note 58, at 342.
unrestat the southernagency [ofCheyenneChiefDull Knife]reported

Officersinvestigating
thatthe Cheyennewere not receiving,eitherin quantityor quality,enoughfood to support
them. Colonel Ranald Mackenzie, scarcely a softtouch when it came to handlingIndians,
RAID OR TRADE? 65
E. Standing Armyversus Militia

Throughout thenineteenth century, whitessubstituted full-time,pro-
fessionalsoldiersforlocal militiasin fighting
Indians.In thefirstyears
ofthenewrepublic,theformer Englishsystemwas maintained: "[I]ndi-
vidualcolonies,and moreoftenthefrontiersmen themselves, hadto pro-
tectthe frontier.""But especiallyafterthe War of 1812,the federal
government hadthearmybuildandgarrison a growing lineofforts."The
defenseof the Indianfrontier was a contributionof thegovernment of
theUnitedStatesto itscitizens."80
Maintaining a standing army,as opposedto raisinga militia,predict-
ably wouldincreasethe numberof battles,as notedabove. Once the
fixedcosts of buildingfortsand raisingtroopsis incurred, themarginal
is relatively
cost of fighting low, increasingtheincentive to fightrather
thannegotiate.A standingarmymeantfull-time officers and, behind
them,military bureaucrats,whose careersand budgetswereadvanced
byfighting.
This latterphenomenon was particularlyimportant duringthe nine-
teenthcentury.FollowingboththeMexicanand CivilWars,thesize of
thepeacetimearmyhad to shrink.This was acceptableto mostenlisted
men,who werelargelyvolunteers.But reducedtroopstrength was of
considerableconcernto careerofficers. Thereweresimplynotenough
positionsto go around,as a missionofhigh-ranking armyofficers under
MajorGeneralShermanfoundwhilevisiting theWestin 1866:"The Civil
Warhad ended,and thedissolution ofthegreatvolunteer armiesofthe
Unionhad been all butcompleted.Yet theexactformand dimensions
of thepeacetimeArmyhad notbeenfixed,and thehighcommandwas
encumberedby an embarrassing surplusof colonelsand generalsfor
whompositionsremainedto be found."'' This conundrum was just a
repriseof thedifficultiesthataroseforcareermilitary at theend ofthe
MexicanWar.82
complained to Sheridan, "I am expected to see that Indians behave properlywhom the
governmentis starving-and not onlythat,but starvingin flagrantviolationof agreement."
He orderedthe post commanderat Fort Reno not to trackdown any Indians who had fled
the reservationin search of buffalo,since it would place the army "in the position of
assistingin a great wrong."
Id. at 371.
79 HenryP. Beers, The MilitaryFrontier,1815-46, at 173 (1975).
80Id.
81 Utley, supra note 35, at xi.
82 See, forexample, Lloyd Lewis, Captain Sam Grant321 (1950):
A man mightwin brevets galore for braveryand skill in the red smoke of battle and still
findhimselfat his old grade when the smoke blew away-a dismal man rottingin the dull
The deriveddemandforpostwarsoldierscame principally from"the

Indianproblem." "[P]rotectionof the frontier populationand travel
routesfromhostileIndiansplacedthelargestdemandon theArmy ...
For [thelatterhalfofthenineteenth century], theU.S. Armywouldfind
itsprimary missionand itsmainreasonforexistenceintherequirements
ofthewestwardmovement beyondtheMississippi."83
The individualsinvolvedunderstood thebenefits offighting.CivilWar
officersretainedtheirbrevetranksandpay as longas theywerefighting
Indians.For enlistedmenas well as officers, an absenceof warmeant
ennuiandlostchancesforadvancement: "It was dismal,frustratingduty.
Boredom,low pay, coarse food and shabbyquarters,harshdiscipline
and cruelpunishment, constantlabor of an unmilitary character,field
servicemarkedby heatand cold, rainand snow,mudand dust,hunger
andthirst, deadening fatigue-thesewereto be expected.Buttheywere
unaccompanied by the prospectof meaningful combatand theopportu-
nity for that
distinction ordinarilymake the terms of militarylifemore
endurable."84 The antidote was battle.After inspecting SmokyHill
the
stage line the and
through Cheyenne Arapahohunting grounds,General
Shermanremarked, "God onlyknowswhen,and I do notsee how,we
can makea decentexcuseforan Indianwar."85
Shermanthen"made cynicalreference to thelocal hungerforarmy
contracts."Such pork-barrel concerns,too, werea reasonforwestern
citizenenthusiasm forthearmy."Usuallycitizenswerehappyto call on
theregulararmyto do theshooting, especiallyas federaltroopsrequired
suppliesboughtlocally. Thisfactoroften causedcitizensto hollerloudly
beforetheywerehurt.'"86The factthatfighting meantincreasedfederal
revenuesin a frontier area was oftennotedbypoliticians at thetime.87
Military incentivesto were
fight epitomizedby the conflictbetween
round of the years, waitinglike a ghoul for some other officerup ahead of him on the
registerto die in bed.
Take Tom [thatis, the future"Stonewall"] Jackson!His brevetshad dazzled the Army
in Mexico, yet six years later he was stilla firstlieutenantwithten otherfirstlieutenants
ahead of him in his regiment.So, in February 1852, he had resigned. ... Shermanhad
resignedfromthe ThirdArtillery... to become a bankerin San Francisco. Burnsidewas
resignedfromthe same regimentin October, to manufacture....
83
Utley, supra note 35, at 2-3. Secretaryof War JohnSchofieldincluded in his 1868
reportto Congress a letterfromGeneral Ulysses S. Grant(thenalmost certainlyabout to
be elected president)thatstated: "While theIndianwar continuesI do notdeem anygeneral
legislationforthe reductionof the armyadvisable. The troopson theplains are all needed."
Dep't of War Annual Report (1868).
84Id. at 110-11.
85 Debo, supra note 60, at 215.
86 Russell, supra note 4, at 47.
87 Utley, supra note 35, at 14-17.
RAID OR TRADE? 67
theWarOffice andtheBureauofIndianAffairs (BIA, or "IndianOffice")

thateruptedalmostas soon as theCivilWarended.Soldiershad incen-
tivesto makewar,butIndianOfficebudgetsdependedon thenumber of
Indiansundertheirsupervision,88 numbersthatobviouslydeclinedwith
everybattle.Thus,themostresolutepoliticalopponentsofthemilitary
(theIndiansthemselveswere not citizens)were the BIA bureaucrats.
The commissioner ofIndianaffairs'annualreports to Congressregularly
featuredincendiary reportsof military campaignsagainstthe Indians,
referringto policiesof extermination and attempts to instillin thetribe
feelings hatredand revenge.
of
In response,the War Officelauncheda campaignto have the BIA
transferredfromtheInteriorDepartment back to theWar Office(from
whichithadbeenmovedto Interior in 1849),a campaignthathadnearly
succeededby thetimetheIndianwarsended.Interior Secretary Orville
Browning complainedthatthe War Department soughtIndianconflicts
to advancetheircase withthepublic;military eventsliketheFetterman
Massacreand Custer'sLast Standclearlyfueledthearmy'sbudgetary
case.89Congressultimately declinedto mergetheIndianOfficebackinto
theWarDepartment, butitdidgivethearmya largepoliticalvictory by
transferringto theWar Department administrationof Indianappropria-
tionsunderthe MedicineLodge and Fort Laramietreaties-jobsthat
ordinarilywouldfallto theBIA.
Anecdotalevidencetherefore indicatesthattheriseofa standing army
didincreasethenumber ofbattleswithIndians,butmoresystematic tests
are possible.Duringthe nineteenth the
century armygrewprincipally
through two wars. In 1845,the U.S. Armytotaled8,509 officers and
enlistedmen.Withthe onsetof theMexicanWar (1846-48),however,
thearmygrewalmostsixfoldto 47,319.It neverreturned to prewarsize,
numbering over 16,000 in 1860. Growth during theCivil War (1861-65)
was phenomenal: theUnionArmytotaledover 1 millionmenin 1865.It
nevershrankto itsprewarlevel,itssize fluctuating between25,000and
30,000menin the 1870sand 1880s.
88
Fred S. McChesney, Governmentas Definerof PropertyRights:Indian Lands, Ethnic
Externalities,and BureaucraticBudgets, 19 J. Legal Stud. 297 (1990).
89 "Agitation for transferof the Indian Bureau to the War Departmentrose and fell
throughoutthe 1870sand almost succeeded in the aftermath of the Custerdisasterin 1876."
Utley, supra note 26, at 209-10. One monthafterCuster's demise,General Shermanwrote
to General Philip Sheridan, "Congress is now in session willingto give us all we want."
Quoted in RobertWooster, The Militaryand United States Indian Policy, 1865-1903,at 86
(1988). "Noting angrilythat the ill-starred[Custer] campaign had been occasioned, to a
greatdegree, by Congress's failureto approve his standingrequest formore militaryforts
on the northernfrontier,[Sheridan] successfullyobtained authorizationto build two new
posts in the Yellowstone regionof Montana. He also demandedand got the rightto police
the Indian agencies." Morris,supra note 58, at 363.
If havinga standing armyincreasesincentives thenumberof

to fight,
IndianbattlesshouldriseafterboththeMexicanand CivilWars.' Table
2 teststhathypothesis. The meannumberof battlesin the fiveyears
following the two wars was significantlyhigherthanin the fiveyears
preceding each war.
It is possible,however,thatthedifference innumbers ofbattlesmerely
reflects a long-termtrenddueto othercauses(including, perhaps,techno-
logicalchange).91 Table 3 presentsregressions thatincludebotha time-
trendvariableand variablesforthetwowarsas predictors oftheannual
numberofbattlesovertime.In each regression, thedependent variable
is theannualnumberofIndian-white battles,as countedcontemporane-
ouslyinofficial government The tablepresents
reports.92 resultsobtained
fromusingbothordinary least squares(OLS) and (because countdata
are beingused) Poissonestimations.93 Besides thetime-trend variable,
thecontrolvariablesincludethedependent variablelaggedbyone year,
because Indianwars oftenstretchedover severalyears. (Use of the
laggeddependentvariable,the Koycktransformation, also resolvesan
otherwiseseriousautocorrelation problem.)In addition,any changein
thesize ofthezone ofcontroversy mustbe contolledfor:increasednum-
bersofbattlescouldstem,notfroma shiftawayfromcontract (treaties),
butfroman increasein thenumberofpointsofcontactbetweenIndians
and whitesclaimingresources.Therefore, a variableis includedto mea-
90The test mightbe criticizedif,while the armywas away fighting, Indians took advan-
tage of its absence to increase attacks on civilians,ultimatelyrequiringthe armyto return
in greaterstrengthto subdue the tribes. However, the numberof soldiers in the west
actuallyrose duringthe Civil War because of the large numbersof Union armyvolunteers.
"Between 1861 and 1865 two millionmen sprangto the defenseof the union. .... Many of
thesemendiscoveredthattheyhad volunteeredfordutyagainstenemiesclad in breechclout
and feathersratherthanConfederategray.By 1865almosttwentythousandsoldiers,mostly
volunteers,served in the West, about double the 1860figure."Utley,supra note 26, at 70.
91 See Wittman,supra note 11, at 733-35, who includes a time-trendvariable in his
empiricalmodel forthe lengthof wars over timebut findsit not to be significant.
92 See the
explanationof data sources in Table 1. Use of the numberof battlesover time
as a measure of the relative propensityto fightmakes the implicitassumptionthat the
decisiveness of battle in resolvingdisputes does not change over time. See Hirshleifer,
Technologyof Conflict,supra note 16, at 133.
93Technically,inclusionof a Poisson estimationis suggestedby the use of count data.
Heuristically,use of the Poisson is furthersuggestedby the model's treatmentof fighting
as a typeof accident-as it indeed is in the settlement-litigationmodels, due potentiallyto
faultyinformation and the otherfactorsdiscussed above. "The Poisson has a long history
as a model foraccident data. L. von Bortkiewicz,forexample, applied the Poisson model
to mule-kickdeaths in the Prussian Army." Ron Michener & Carla Tighe, A Poisson
RegressionModel of Highway Fatalities,82 Am. Econ. Rev. 452 (1992) (citationomitted).
For a generaldiscussion, which also uses accidents like productfailuresas examples, see
D. R. Cox & P. A. W. Lewis, The StatisticalAnalysis of Series of Events 1-58 (1978).
TABLE 2
INDIAN BATTLES BEFORE AND AFTER THE
MEXICAN AND CIVIL WARS
Mean Annual
Years Number of Battles
A.* 1841-45 2.8
1849-54 8.4
B.t 1856-60 31.6
1865-69 110.4
* Means are significantly at .01
different
level (t = 2.61).
t Means are significantly
different
at .01
level (t = 4.09).
TABLE 3
REGRESSIONCOEFFICIENTSFOR THE EFFECTS OF MEXICAN AND CIVIL
WARS ON INDIAN BATTLES, 1790-1897
Ordinary
Least Squares Poisson
Constant 6.628 1.518*
(1.32) (11.69)
Trend -.118 - .0106*
(1.17) (4.38)
Lagged numberof battles .695* .0146*
(9.44) (17.24)
Mexican War dummy 12.36** 2.35*
(2.16) (16.51)
Civil War dummy 25.49* .118***
(3.20) (1.29)
New settlementlands .354E - 4 - .322E - 4*
(.074) (2.69)
CorrectedR2 .813
F 85.36
Durbin-Watson 1.98
Durbin's h .149
Likelihood ratio statistic 2,569
X2 1300.6
NOTE.-Tests are one tailed; absolute t-statisticsare in parentheses.De-
pendentvariable = annual numberof battles. N = 98.
* = Significantat .01.
** = Significantat .05.
*** = Significantat .10.
suretheamountof new settlement land. This variablemeasures,up to

1860,theannualamountof publicland sold by thefederalgovernment
to privatecitizens.The HomesteadAct of 1862endedpubliclandsales
infavorofgovernment landgrants;thevariablefornewsettlement lands
from1863thusmeasures the amount of homestead grants.94
The effectsofthetwo warsare measuredby use ofbinaryvariables.
The MexicanWar dummyis coded 0 before1848and 1 thereafter; the
Civil War variableis coded 1 for the years 1865-70 and 0 otherwise,
reflectingthe significant reductions (fromover 1 milliondownto about
25,000troops)achievedby 1870.As Table 3 shows,forthe OLS and
Poissonestimatesalike,bothwar dummyvariablesare significant in a
model that also includes the time-trend, settlement-land, laggedde-
and
pendent variables. Based on the OLS estimates, theMexicanWar'seffect
was a discontinuous increaseof some twelvebattlesper year,ceteris
paribus;the Civil War increasewas twenty-five battlesper year.The
time-trend and land-settlement variablesare significant onlyin thePois-
son estimation; thelaggedbattlevariableis highlysignificant forboth.
The effectof thegrowing army can be tested more directly. In Table
4, regression (1) shows theeffects of army size on theannual number of
battles.The OLS and Poissonresultsare similarto thosein Table 3; in
particular,armysize has a significant, positiveeffecton thenumberof
battles.It might be objectedthatthenumber ofbattlescouldconceivably
affectthe currentsize of the armyas well as vice versa.In regression
(2), therefore,thesize ofthearmyis laggedbyone yearand substituted
as theindependent variableofinterest; itis statistically
significantinthe
Poissonmodel.It is interesting, too,thatestimates(notpresented here)
of the effectof a givenyear's battleson nextyear's armysize-the
obversemodelfromthatin regression (2)-show no significant impact.
In otherwords,armysize in yeart - 1 affects thenumberofbattlesin
yeart, but notvice versa. The relationbetweenbattlesand armysize
was also testedusingtwo-stage leastsquares,witharmysize againhaving
a significant,positive effecton numberofbattles.95
94 The relevantmeasure is not the numberof homesteadgrantsthatultimatelyripened

into fee-simpleownership some years later but the numberof grantsmade annually. A
principalrequirementof homesteadgrantswas thatthe lands firstbe settledand improved
beforefullownershipresulted.It was thatoccupation and improvement,ratherthan later
grantoffullownership,whichwould have forcedconfrontation betweenIndiansand whites.
In any event, the correlationbetween the amountsof new settlementlands in years t and
t - 1 is veryhigh(0.74).
95 With battles
as the dependentvariable, lagged numberof battles and the time-trend
variablewere treatedas predeterminedvariables, and currentarmysize was treatedas the
instrumentalvariable. The two-stageestimate showing a positive effectof army size on
numberof battleswas correctedforfirst-order autocorrelation.
RAID OR TRADE? 71
TABLE 4
REGRESSIONCOEFFICIENTSFOR THE EFFECTS OF ARMY SIZE ON INDIAN BATTLES, 1790-1897
(1) (2)
Ordinary Ordinary
Least Least
Squares Poisson Squares Poisson
Constant 7.83 2.63* 7.44 2.64*
(.593) (12.95) (.534) (13.05)
Trend - .056 .593E - 3 - .048 .165E - 2
(.137) (.238) (.335) (.66)
Lagged numberof battles .850* .0171" .855* .0166*
(12.59) (33.96) (12.10) (33.62)
Armysize -
1.748E 5** .642E - 6* ..
(1.65) (7.21)
Lagged armysize .. . 1.039E - 5 .465E - 6*
(.938) (5.51)
New settlementlands . . . - .436E - 4* .. . - .616E - 4*
(2.70) (3.81)
CorrectedR2 .752 .749
F 58.73 55.50
Durbin-Watson 1.97 2.05
Durbin's h .135 -.329
Likelihood ratio statistic 1,307 1,288
X2 851.31 854.7
NOTE.-Testsare one tailed;absolutet-statistics
are in parentheses. variable= annual
Dependent
numberofbattles.N = 58.
at .01.
* = Significant
at .05.
** = Significant
Finally,separatefiguresare availablefrom1840on the size of the

westernarmy,thatis, thenumberof troopsmoreparticularly involved
in Indianbattles.In Table 5, whenthe variableforwesternarmysize,
eithercurrently [1]) or laggedby one year(regression
(regression [2]),is
substitutedforthevariableson totalarmysize, armysize againis found
to have a positive,significant
effecton annualbattles.
IV. CONCLUSION
Economicanalysishelpsexplaintheevolution fromnegotiationtowar-
fareas themechanism forresolvingdisputesbetweenIndiansandwhites.
ThenotionthatwhitesarrivedintheNew Worldpredisposed to extermi-
natingIndiansfortheirlandmakeslittletheoretical senseand is unsup-
portedempirically. The changein Indian-white relationsfrompeaceful
to bellicose,gliblyattributed
to changesin "ideology,"can be explained
bya numberoffamiliar economiccostsand benefits.
TABLE 5
REGRESSIONCOEFFICIENTSFOR THE EFFECTS OF THE SIZE OF THE WESTERNARMY ON INDIAN
BATTLES, 1840-1897
(1) (2)
Ordinary Ordinary
Least Least
Squares Poisson Squares Poisson
Constant 49.33* 7.03* 40.03* 3.38*
(2.94) (18.65) (2.15) (13.75)
Trend - .788* - .0812* - .603* - .0133*
(2.95) (13.12) (2.07) (4.32)
Lagged numberof battles .649* .370* .600* .0178*
(9.17) (3.24) (7.02) (31.0)
Westernarmysize .0022* .234E - 3*
(2.92) (13.48)
Lagged westernarmysize . . . ... .00017** .182E- 4*
(2.071) (4.13)
New settlementlands . . . -.214E-4 ... .975E- 5
(1.27) (.60)
CorrectedR2 .880 .837
F 115.22 79.57
Durbin-Watson 2.15 2.34
Durbin's h - .533 -.205
Likelihood ratio statistic 1,225 1,051
361.29 481.98
x2
NOTE.-Testsare one tailed;absolutet-statistics
are in parentheses. variable= annual
Dependent
numberofbattles.N = 43.
at .01.
* = Significant
at .05.
** = Significant
This episodedemonstrates the importance of property rights.If two

demanders ofa resourcehavewell-defined systems of divestibleand en-
forceablerights, costs
negotiation are lower andtrade more likely.When
sucha commonset ofproperty rights lacking,however,thepotential
is
forpeacefulnegotiations declines.The commonperception thatwhites
and Indiansresolvedtheirdisputesmostlythrough battleis onlycorrect
fortheperiodafterthe Civil War,whenland thatnobodyowned(and
therefore thatno one couldnegotiate for)was at stake.
Finally, theIndianwars show theimportant roleofpoliticsincollective
decisionsto raidor trade.Particularlywiththesubstitution ofa standing
armyforlocal militias,war ratherthannegotiation becameusefulfor
politicallypotentgroupsin the UnitedStates.The Americanhistorical
experienceshows how "mightmakesrights,"notjust because of the
relativelyhighcostsofnegotiation butbecauseraidingitselfcan achieve
politicalaimsnotattainablethrough trade.
RAID OR TRADE? 73
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Booth School of Business, University of Chicago

University of Chicago Law School

Raid or Trade? An Economic Model of Indian-White Relations

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[W]henitwas no longersafeto seize valuablesbymainforce,

WHITES came to America brandishingroyal chartersthat allocated

* Andersonis ProfessorofEconomics and SeniorAssociate, Political

model of whiteacquisitionof Indian resourcesby conquest has spawned

fully,therebyenhancingtotalwelfare,or theycould fight,imposingdead-

II. AN ECONOMIC MODEL OF NEGOTIATION VERSUS TAKING

8 JohnUmbeck, MightMakes Rights:A Theoryof the Formationand InitialDistribution

and places equal in theirabilitieseitherto produceor to use violence.

Indians;royalgranteeswere rarelyinclinedto negotiatewithIndians

to forceand negotiationcosts(including costsof strategicbehavior)are

16See, forexample, Jack Hirshleifer,The Economic Approach to Conflict,in Economic

or ofdefenseexpenditures. Obviously,theoptimallevelof spending on

17 See, forexample, Wittman,supra note 11. See also note 18 infra,discussingsimilar

The zone ofcontroversy's size dependson each side's marginal

For Indiansto havea surplusfromnegotiation

The surplusfromnegotiation is simplythedifference betweenthecosts

wrong)probabilities cannotproduceconflict as longas CF > CN. Over-

ries,whereno one tribehad recognizedrightsto excludeothers,and

nottreatedas important elementsin thesettlement-litigation literature,

29 Differentialcosts of assemblingfightingforcesare not capturedby equation (6). War's

In thisrespect,theexistenceofa standing nationalarmyis againimpor-

tive-sum solutionsto disputescan be tracedto some "contractfailure"

III. EMPIRICAL EVIDENCE

34 Brown, supra note 3, at 3.

pancy."43In supporting Indianland rights,Jefferson assertedthatthe

43 Kirke Kickingbird& Karen Ducheneaux, One HundredMillionAcres 7 (1973).

50 Prucha, supra note 13, at 145-46.

SOURCES.-For battles,see DepartmentofWarAnnual

way of resolvingcontroversy.In fact, Congress voted in 1871 not to

54 This was part of Congress's effortto exert legislativepower duringReconstruction.

theirtechnologypeacefullyto impressIndians withthe pointlessnessof

59 Morris,supra note 58, at 348.

and plentyofammunition, whiletheIndianswereusingtheold muzzle-

D. PropertyRights and Other TransactionCost Problems

67 Debo, supra note 60, at 13-14.

In 1768 Governor William Penn of Pennsylvaniaproposed the ultimatelaw. A flood of

unrestat the southernagency [ofCheyenneChiefDull Knife]reported

E. Standing Armyversus Militia

The deriveddemandforpostwarsoldierscame principally from"the

theWarOffice andtheBureauofIndianAffairs (BIA, or "IndianOffice")

If havinga standing armyincreasesincentives thenumberof

suretheamountof new settlement land. This variablemeasures,up to

94 The relevantmeasure is not the numberof homesteadgrantsthatultimatelyripened

Finally,separatefiguresare availablefrom1840on the size of the

This episodedemonstrates the importance of property rights.If two

Atkinson,Scott E.; Sandler, Todd; and Tschirhart,John."Terrorismin a Bar-

Ethnic Externalities,and BureaucraticBudgets." Journalof Legal Studies 19

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